Meritage Homes(US:MTH)2023-11-01 20:32Financial Performance - In Q3 2023, the company achieved record home closing revenue of $1.6 billion from 3,638 homes, representing a year-over-year increase of 4.3% in volume and 2.6% in revenue[91]. - For the nine months ended September 30, 2023, home closing revenue increased by 4.5% to $4.4 billion, with a home closing volume of 10,025 units, up 4.8% year-over-year[92]. - Company-wide home closing gross profit for Q3 2023 was $429.6 million, with a gross margin of 26.7%, down from 28.7% in Q3 2022, attributed to increased buyer financing incentives and higher land development costs[120]. - The effective income tax rate for Q3 2023 was 22.4%, up from 20.3% in the previous year, impacting net earnings which decreased to $221.8 million from $262.5 million[91]. - Financial services profit for Q3 2023 was $5.7 million, an increase from $4.8 million in Q3 2022, driven by higher home closing volume[125]. Home Sales and Orders - Home orders for Q3 2023 increased by 50.4% year-over-year to 3,474, with a cancellation rate improving to 11% from 30% in Q3 2022[93]. - Total home orders for Q3 2023 reached $1.5 billion, a 53.5% increase from $974.3 million in Q3 2022, with homes ordered rising to 3,474 from 2,310[109]. - The average sales price (ASP) for homes ordered in Q3 2023 was $430.5 thousand, up 2.1% from $421.8 thousand in Q3 2022[109]. - The cancellation rate improved to 11% in Q3 2023 from 30% in Q3 2022, contributing to a 50.4% increase in home order volume[109][107]. Backlog and Inventory - The company ended Q3 2023 with a backlog of 3,608 homes valued at $1.6 billion, reflecting a decrease of 40.5% in units and 44.9% in value compared to the previous year[95]. - The backlog at the end of Q3 2023 was valued at $1.6 billion, down 44.9% from $2.8 billion at the end of Q3 2022, with homes in backlog decreasing to 3,608 from 6,064[105]. - The East Region's backlog at the end of Q3 2023 consisted of 1,473 homes valued at $608.6 million, down 44.9% from 2,671 homes valued at $1.1 billion in the prior year[116]. Regional Performance - The West Region saw home closing revenue of $606.8 million in Q3 2023, a 2.8% increase from $590.0 million in Q3 2022, with home orders up 116.0%[111]. - The Central Region's home order volume increased by 73.1% in Q3 2023, reaching 1,099 homes, while the cancellation rate dropped to 13% from 37%[113]. - The East Region closed 1,364 homes in Q3 2023, generating $550.8 million in revenue, a 14.9% increase from the prior year[115]. - For the nine months ended September 30, 2023, the East Region reported 3,827 home closings generating $1.5 billion in revenue, reflecting increases of 7.7% and 8.7% year-over-year, respectively[116]. Cost and Expenses - Home closing gross margin for Q3 2023 was 26.7%, down from 28.7% in Q3 2022, primarily due to increased incentives and higher land development costs[91]. - General and administrative expenses for Q3 2023 rose to $63.1 million, up $14.6 million from $48.4 million in 2022, reflecting higher compensation costs and increased spending on technology[127]. - The West Region's home closing gross margin for Q3 2023 was 23.3%, a decline of 330 basis points from 26.6% in the prior year, impacted by higher incentives and land development costs[122]. Cash Flow and Financing - As of September 30, 2023, the company reported net cash provided by operating activities of $460.1 million, a significant increase compared to a net cash used in operations of $169.8 million during the same period in 2022[142]. - The company utilized $34.7 million in investing activities during the nine months ended September 30, 2023, compared to $24.9 million in the same period of 2022, primarily for property and equipment purchases[143]. - Net cash used in financing activities totaled $238.2 million for the nine months ended September 30, 2023, which included $150.0 million for the partial redemption of 2025 Notes and $55.0 million in share repurchases[144]. - The company's debt-to-capital ratio improved to 18.5% as of September 30, 2023, down from 22.6% at the end of 2022[145]. Market Strategy and Outlook - The company aims to maintain at least a 5% market share in all markets and is focused on delivering affordable homes through simplified production processes[99]. - The company anticipates primary demand for funds over the next twelve months will be for home construction and land acquisition, supported by cash and cash equivalents on hand[135]. - The company plans to fund its material cash requirements primarily through cash flows generated by operations, with potential additional debt or equity financing[138]. - The company has no debt maturities until 2025, indicating a stable short-term liquidity position[138]. - The company’s operations are sensitive to interest rate changes, which could adversely affect revenue and borrowing costs[153].